Semcorp Marine - sustainable recovery if above 1.90

An Adam & Eve pattern is forming on Sembcorp Marine.   This is a potentially bullish pattern, confirmed upon breaking above the neckline at 1.90 .

This stock has been in a down trend since hitting a high of  $5.46 in 2012 and since then, it has seen a number of rallies that failed.  The formation of an Adam & Eve pattern now is potentially a harbinger that it's worst could be over.  A break above 1.90 would confirm this.

Moya Asia - Accumulation

There has been a lot of accumulation for Moya Asia in the recent months.  The chart is in stage 1 (bottomed out and forming a base).

It is still in early stage, and could still take a while to move to the next critical "resistence" levels of 0.08, and finally 0.12.

0.12 is very critical and should it be able to go above this level, then recovery is underway with a projected initial target of 0.22.  

Here is the big picture (larger time frame):

Here is a close up picture (near term timeframe)

Just because a chart looks right technically does not mean it will work according to expectations all the time.  The current stop loss level of Moya Asia is 0.65, below which any near term bullish expectations will have to take a hiatus.

Noble - attacked by Iceberg Research on Friday!

On 14 Feb, I wrote that Noble Group had broken up into Stage 2 above $0.21 and the odds are good that it could rise to an initial target of 0.30 (40% upside). See my previous post here.

Less than 2 weeks later, as Noble was progressing nicely and hit a high of 0.28 on Friday ( just 2 cents shy of the projected target) when out of the blue, it started selling off aggressively. In fact, the selling was so ferocious that it plunged all the way to 0.200 before it staged some rebound to close at 0.225.  A quick search for news showed the reason for its sudden plunge: CNBC: Noble shares take another iceberg on the chin

If we had trailed our stops, we would have exited at a much better price than 0.225. 
Unforeseen things could happen and it is always a good practice to have stop orders in place after we entered a position. Do check with your broker how you can trigger an exit though a 'stop limit' order.

So what now for Noble going forward?  If you had not already staked into the stock, then it is probably better to look elsewhere as this stock has been 'maliciously' targeted by Iceberg Research and it is possible it could succeed. 

However, for the sake of technical discussion, there is a chance that Noble could survive this latest attack as the chart dynamics have changed since the 1st attack by Iceberg 2 years ago.

A look at Noble Group's larger picture (weekly chart dating back from 2014) showed that

Noble was already a weak chart trending down as Iceberg launched its first malicious attack. As the attacks continued throughout 2015 and 2016, Noble's price dropped a whopping 90% to a low of 0.112 in September last year.  

But for the past 6 months, Noble Group was no longer in a downtrend but had been building a steady flat base.  Perhaps at below 20 cts, it has possibly reached a price point where value investors are starting to get interested (see the huge volume accumulation there). Iceberg's attack now might not be that effective in creating fear for long. 

It would be interesting to see if the 'optimistic' technical picture will hold out.  I am still thinking it might not breach the 0.197-0.200 support but if it does, then all bullish momentum bets are off.  

Ausgroup - waiting for a break above 0.062

Lately, a number of oil related stocks have been starting to rise from Stage 1 of the market cycle towards Stage 2.  (See "4 Stages of a Market Cycle: here)

Ausgroup is one such stock that appears to be close to breaking above the near term resistence of 0.062.  If it does breakup eventually with strong volume, then the odds are good that it could reach an initial projected target of about 0.085 (37% upside).

Let's wait and see.

Note: project target are only odds, it could fall short.  Hence I would also trail my stops up as the stock progresses in my favor.

Wilmar - Cut Loss

On Feb 18, I noticed that Wilmar was forming a pennant formation, which is a bulllish continuation pattern. (see this post).  

2 days later on 21 Feb, Wilmar announced a seemingly stellar set of results:

But instead of rising, Wilmar tanked!  So what happened?  

Possible reasons are:

• "sell on news".  Wilmar has already advanced a good amount since it's previous quarter's release and the good news is already factored into the current price. Hence it's time to take profits!

•  Results might be very good but traders were expecting more.  Hence it is actually disappointing. Better take profits and run!

The breakdown of the pennant formation is telling us that it's near term potential isn't great (despite the bullish results announcement).  Hence traders who depended on news to trade will often be too late to the party and found themselves caught on the wrong side of the trade, rushing to buy the good news when astute traders were exiting.  

Even technical traders may find that a trade does not always work out as expected.  But it is ok as long as we follow strict rules to cut a loss quickly.

Exiting a Trade

There are basically 2 reason for a trader to exit a trade:

1. To take profits
2. To cut loss

Both are important (especially #2).  For simplicity, I will explain in the context of a Long trade (ie, buy with the expectations that the stock will rise) for a trader.

Why is cutting loss important?

Cutting loss is part and parcel of the game.  When to cut loss will depend on our trading time horizon and the strategies we employ.  

For many inexperienced traders, taking profits is the easy part.  Cutting a loss is very difficult and often never done (they prefer to wait, pray, and hope for the trade to at least come back to break even).  

Sometimes a stock could simply be acting badly due to some fundamental issues; or the bull run could have ended.  Whatever the reason that the stock acted badly, traders who do not practise loss cutting may end up becoming a "long term investor" holding a lot of stocks with no chance of breaking even in the foreseeable future. The (paper) loss could be so huge that it surpassed the profits they had made during the run up.  

The good news is, cutting a loss gets easier the more we practise it, though it may still hurt (ouch!) but once we cut we are able to move on to new opportunities.  Cutting loss enables us to focus on the good trades, rather than waste our time and energy fixated on the bad ones.  The aim is to have a good winning trade that will make up for several small losses, rather than having several small profits that are wiped out by one big loss.

Trading is about odds, good strategies ensure higher chance of profitable trades but without the right money management (right position sizing, favorable risk/reward ratio, and loss cutting), we may never be very profitable.


How and when to take profits?

The common strategies are:

1. Fixed Profit Target 
    - exiting based on chart pattern projections or based on overhead resistences

       some examples

2.  Trailing Stops
     exit the trade if a stock starts going below:
     - the last pivot low, or 
     - below a rising moving average, or 
     - below a rising trendline

     variations may include exiting when the stock retraces beyond a certain % from the recent high.

Wilmar - breaking above $4.00 soon?

Wilmar has already advanced 60% from $2.50 at the start of Oct 2016 till now,  
It has been consolidating between $3.85 to $4.00 for the past month but is looking ready to break above $4.00 soon .

How much more upside?   If we look at the bigger picture of Wilmar (way back from 2010), 
the projected target is around $5 (another 25% upside).  It is probably not going to be an explosive move like a number of the penny stocks though.  Let's check back some time later to see if this stock progress as expected!  (p/s if it falls below 3.70 in the near term,  then the bullish outlook will no longer hold).

SembCorp Industries - Poised to break up

Sembcorp Industries was on the recovery track after forming an "Adam & Eve" bottom.

The trend is now up with a bullish consolidation flag completed recently when it retraced from 3.30 back to 3.07.  Am expecting it to break above 3.30 in the not too distant future.

Hyflux - Turning the corner

Hyflux was in a long downtrend since 2011 but was already turning the corner when it established a "double bottom" (a potentially bullish pattern) in late 2016 at 0.45.

There is strong volume building up since 2016.. a good sign that a bottom is in place. 
For a confirmed uptrend, wait for a break above 0.65 (a horizontal resistence).   The odds are looking quite good.  Let's wait and see.

I like to trade chart patterns.  There are some well know patterns that we need to give attention to when we see them as they could be giving a hint that a major trend could be emerging.

Head & Shoulders / Inverted Head & Shoulders and Double Tops / Bottoms  are one of those.

See also: Chart Patterns 101

p/s I know what you are thinking.. "how nice if I had bought it at 0.45!".  Well, the problem with buying low is that we never know if that is the rock bottom (unless you are "smart money").  You may end up seeing a new low after you have bought. :(

Hence, it is okay to buy "more expensive" as long as the odds are good that it will get "even more expensive" in the coming future.  That doesn't mean we chase a rising stock mindlessly.. how to enter (and how to exit,this one is tougher!)..that will be another topic I plan to write about.

Commodities Bulls Underway

It seems many down and trodden commodity stocks are really starting to fly!

Alliance Minerals, GSS Energy, Geo Energy Resources, Noble Group.. to name a few.

Is it a Trump effect?  I don't know and I don't care.  I only care what the charts tell me.

A check on the major commodity ETF (exchange traded funds) review that Crude Oil, Agricultural Produce and Metals have all hit rock bottom last year and are all now just embarking on an uptrend (Crude and Agriculture) or already in a trend (base metals).

No wonder these penny stocks are running!  The smart money knows.

see also: Chart Patterns basics

          Crude Oil 

                  

                   Agriculture

                 Base (Industrial) Metals

Noble Group - Broke up on strong volume today

Noble Group broke up on high volume today!

It opened at 0.225 but dipped briefly back to 0.21, giving a great opportunity to stake near the breakup level.

The  projected initial target is about 0.300, which is about 40% upside! 
Will it come true?  Nothing is guaranteed though the odds are reasonably good. We can only wait and see.  

The support is at 0.197.  Any near term retest of the price at 0.197 is healthy as long as it does not dip any lower than 0.195.  

previous post on this stock

Penny Stocks Are Getting Bullish

A number of our penny stocks are entering into an early bull phase (Start of Stage 2) of the market cycle.  Time to get on board for the ride (don't wait till it's too late!).

check out: 4 Stages of a Market Cycle

This is the FTSE Catalyst Index.  Do you see the transition from Stage 1 (bottoming process) to Stage 2 (uptrend)?   The longer the bottoming process, the stronger the Stage 2 when it emerges.
However, not all the stocks that are starting to rise from rock bottom are Catalyst stocks, some are actually Main-Board listed too.

Tips:
1. We don't necessarily want to park our money when it is still forming a base, we could end up waiting for forever for the stock to get into Stage 2 (some might never!).

2.Wait for the stock to get into Stage 2 to get the best bang for our buck.  But don't wait too long to see a very obvious and established uptrend before we jump onboard.

3. Not all stocks that are emerging from the bottom are created equal.  We want to look for certain characteristics that ensure a higher chance of a successful trend.  A high level of accumulation by smart money(ie marked increased volume) just weeks (and up to a couple of months) before breaking up is a good sign.

4. The ride can still be volatile!  Even in an uptrend, there are pullbacks along the way.  If you have already missed the initial breakout, either you wait for a pullback to enter or trade smaller amounts so you can endure any pullbacks that might happen soon after you enter.

5.  Take some profits along the way but don't take all too quickly if you spotted a stock in early Stage2.  You may end up missing most of the move.  Entering is easy, exiting is the tricky part.

6.  Lastly, not all trades will pan out as expected, even with charts showing the best odds.  We need to cut loss and move on if the stock started to act badly and sunk below near term support levels.  Do not hold and pray (and eventually forget).  With the right odds, there are many that will work out, why sacrifice the forest for that one lousy tree?

Noble Group - waiting to break up?

Noble Group has yet to break out of it's base.  Let's wait and see if it wil break above 0.21 soon before entering.  I would also want to see good volume if and when it breaks up.  Otherwise, it could end up being just a mediocre stock.

Mermaid Martime

Mermaid Maritime is now clearly in Stage 2 (uptrend).  It first broke out of a base at 0.14 in early Dec 2016 and has been steadily climbing since.   You might want to watch this stock and see if it can pull back a little before jumping on board.   There is support around 0.200.

p/s a stock that drops back below "support" usually means bad news and time to cut loss.

GSS Energy - Ran today, but room for more

GSS Emergy broke strongly above the 1st resistence at 0.107 to close at 0.120.  There is another resistence coming up at 0.126 which it will need to break above for the long to continue.

Do not chase blindly, preferably wait to see if there is some pullback to enter.
The support is now at 0.107.  Do not buy if it goes below this level.

Dyna-Mac - waiting for a break above 0.215

Waiting to break above 0.215 for the longer run with near term support at 0.185.

ArtiVision

A break above 0.32 would confirm the up trend.  Coming Soon?

4 Stages of a Market Cycle

Basically there are 4 stages of Market Cycle / Stock:

Stage 1. Accumulation by smart money
Stage 2. Trending up (bullish)
Stage 3  Distribution by smart money (topping out)
Stage 4. Decline (bearish).

Not all stocks are at the same stage at the same time.  They market may go by sectors or industries.

Typically the blue chips are the first to emerge from a market bottom into Stage 2 while the penny stocks may start to run when the blue chips are starting to churn at the top.

Stage 1
Came about after a prolonged downtrend when the stock has bottomed out.  Sellers are no longer interested in selling and some "value" buyers have come in.  But basically the stock can drift sideways for a long time until there is enough impetus to propel it into a new trend.


Stage 2
Usually just before the stock breaks into Stage 2, there is some stealth accumulation by smart money   These are usually investors who are "in the know".  Perhaps the company is finally turning around or has some angel investors coming in. Mostly likely the the volume has been steadily increasing for several weeks and finally it broke decisively up!   

However, in early Stage 2, no one will believe the breakup is for real!  The fundamentals being reported are likely to be still bad, the outlook still sucks.

But by late Stage 2, the picture is very different, everyone is talking and dreaming about these stocks and how easy it is to make money.  The media is likely giving it lots of coverage too.  

Stage 3
Finally the stock begins to churn sideways as the smart investors who bought early is slowly selling the stock (which is likely way overpriced by now and with fundamentals already priced in and appears stretched).


Stage 4
It may start with a sharp or slow decline.  Everyone believes it is only a temporary correction. The fundamentals are probably still good. "Sucker's rally" happen along the way to give suffering investors renewed hope, and they may even average down!  After a short relief, the stock declines further, the pain intensifies and finally there is panic selling, especially when it is near the bottom.  When all hopes are lost and sellers have finally cut or given up selling, the market hits bottom and finally drifts into Stage 1 again.


Well, the above are the textbook scenarios.   There are times when the stages are just not so easy to identify and we will probably have swing trade for smaller profits rather than attempt to hit (or hope for) a home run.   Hence we need to be flexible as well. 

However, when I do see a stock with clear staged 1 formed and has just moved into Stage 2, with all the criteria in place, then I will hang on for a bigger ride (with trailing stops in place).

Back from Hiatus

Hiatus from Blogging, not Trading :)

It's been more than 6 years since I last attempted to blog about the markets, and it's been more than 10 years since I embark on this journey of trading.  There is just so much to share and still so much to learn.  

I trade mostly Singapore stocks but watch the world markets and commodities for overall direction. 

The market comes in waves and when it does come, ride the trend early!  

When I have the time, I will share with you about
1. Why I use Technical Analysis
2. The 4 stages of a Market Cycle and why it is important to know which stage we are in.
3. Money Management (very important!) and any other tips and experiences that are important to surviving trading over the long term. 
4. etc

This blog is still in developmental stage and is very "raw" right now.  I just wanted to post on some opportunities that is sprouting up right now and hope you managed to catch part of this wave as well. 

However I would caution that not all stocks featured will work out as expected (despite having better odds).  Hence do cut loss if it does not pan out as expected.

Feel free to drop me your comments! :)